somebody’s lying
A couple of weeks ago I wrote about the Dow Theory, that basically looks for confirmation in the broader market (Dow Jones) and Transportation stocks. Dow Theory in its basic form says that the transportation stocks must confirm the direction of the broader market, if it doesn’t then there is a red flag. The rationale (in its most basic form) is that if the market is heading higher and the economy is good then transportation stocks must be doing really well moving all the product around the country. If the tranport stocks (truckers, airlines, railways) are not going up with the Dow, then it could be a warning shot.
Add to this that transport companies generally trade inverse to energy prices. Makes sense right? The biggest cost to a trucker, airline or railroad is fuel. So if their expenses are lower and the economy is doing well then transports should be killing it! Just one problem, energy input prices have been dropping hard the past few months (oil, gas, coal, etc) and so have transport stocks…….
So somebody has to be lying correct? We hear the economy is growing, jobless rate is at multi-decade lows, oil and gas are dropping but transport stocks are down on the year?
Is it a remarkable buying opportunity in transports (especially railroads)? Or is this a warning that things are not as rosy as they seem?
